Retailers, officials debate incentives

Trademark to decide on Padre mall by Aug. 31

The debate about whether tax incentives should be used to encourage retail development on Wednesday went before a group whose members likely will build at least part of whatever new comes to town.

About 200 members and guests of the Associated Builders and Contractors Coastal Bend Chapter heard from a panel that included City Manager Skip Noe, Padre Staples Mall co-owner Shawn Bevly, real estate developer Leon Loeb and Crosstown Commons developers Jeff Hess and Jeff Brewer. The issue became a community debate because the Crosstown Commons group sought tax incentives and local retail landlords, led by Padre Staples Mall, opposed the request.

Absent from the panel were representatives with Trademark Property Co., which is considering buying and renovating Padre Staples Mall. Trademark officials were invited but did not attend, said John Taylor, president of the association.

Reached after the event, Bill Morris, Trademark's senior vice president, said he is busy working on the Padre Staples Mall project. The company still is interested in the mall and will decide by Aug. 31 whether to proceed with it. More details on the company's tax increment financing request also will be ready then, Morris said, adding it will include a plan to alleviate congestion near the mall.

"If we can get a TIF that is proportionally the same size (as Crosstown Commons') then we think we can be competitive," he said.

Trademark initially joined Bevly and Loeb in opposing the TIF policy both on principle and practical grounds -- arguing that the existing properties had been built without public subsidy and giving the newcomer a tax incentive would be an unfair competitive advantage that could put them out of business.

Last month the City Council approved a preliminary agreement to give $40 million in tax incentives to the group that has proposed Crosstown Commons, a 1.5 million-square-foot retail center planned for Holly Road and Crosstown Expressway.

The incentives include a tax increment finance zone and a sales tax revenue split. It would cover costs for off-site infrastructure such as public roads and drainage, and on-site improvements such as parking lots, landscaping and interior roads.

In tax increment finance zones, the additional property tax revenue that results from improvements added after the zone is established is spent within the zone. With a sales tax revenue split, the city would rebate to the developers a portion of the city's sales tax revenue generated by the mall.

Trademark's TIF request did not include a specific dollar amount, and Morris said he's unsure whether the amended TIF application would include one. Trademark rushed to complete its application to meet a deadline in the new incentive policy and plans to submit more detailed information to the city next month.

Trademark President Terry Montesi has said the company could spend between $175 million and $250 million on renovations to the mall and nearby Staples Center, which the company also is negotiating to buy. He previously said a TIF request would be in the $15 million to $25 million range.

The tax incentive deal between the city and Crosstown Commons is expected to be back before the council this fall with a final financial agreement.

During Wednesday's luncheon, Noe told the group that before the council voted on the TIF policy and Crosstown agreement, city officials considered what other cities have done with TIF policies for retail development, what studies revealed about the potential for economic impact, and if new retail development could recapture lost sales and generate new sales.

Bevly said Padre Staples Mall isn't afraid of competition from Crosstown Commons or others who would seek TIFs from the city, but wants to see a fair economic development policy.

"A good economic development policy supports growth and enhances existing retail businesses, first and foremost," she said.

Loeb, owner of LandLord Resources, which owns about 300,000 square feet of retail space in the city, said it wasn't possible for the city to provide a level playing field for smaller development groups to receive incentives.

"The economy of creating a (TIF) for areas as small as we do, 10 to 15 acres, it just isn't feasible from the standpoint of legal and administrative costs," he said. "There's not enough tax increment out there once you start this to give away."

He said tax revenue from new projects are designed to fund improvements throughout the city and if they're put back into the project, as happens in a TIF, those citywide improvements aren't made.

Jeff Hess, the chief operating officer of Hawkins Cos., and Jeff Brewer, development manager with CBL &amp; Associates, the developers of Crosstown Commons, said tax incentives are a tool that brings new construction and new retail development.

A few of the questions from the audience focused on a sliding scale of incentives for Crosstown Commons based on how much retail space is built, from $13 million in incentives for 500,000 square feet to $40 million for 1.5 million square feet.

Brewer said the plan is to build the whole 1.5 million square feet, but the interest shown by retail tenants will determine its size.

"It needs to be more than 1 million square feet in retail to make this project viable," he said.

Both Crosstown Commons and Padre Staples officials told interested builders and contractors that there was work for them in these projects, and told those in the audience whom to contact.